India has been home to diversified culture, ethnicity and invaluable heritage for decades. India’s flourishing economy has given India to reign as the world’s 5th largest economy. Being a land of opportunity, this decade indeed belongs to industries and businesses that would help its exponential growth. In recent years, the southern part of India, especially Chennai, has witnessed a drastic rise in demand for resources and support for all types- of small, medium and large businesses. Assessing finance through loans or equity certainly lessens your business ownership and involves a lot of time and hassle. So let us look at some of the facts about business loans in Chennai, Tamil Nadu.
Did you know? India's top auto clusters are located in Tamil Nadu, one of the top 10 global automobile hubs. The State is frequently referred to as the "Detroit of Asia" and the "Automobile Capital of India." It has more than 1300 factories connected to this industry, making it one of the top manufacturing hubs in the world.
Eligibility for a Business Loan in Chennai
Any person who is running a business with a decent amount of earnings can be qualified to get a business loan. However, banks have specific criteria and checklists as to how much loan should be given to whom. It can be based on various factors, such as
- Business Structure (Sole Proprietorship, Partnership Firms, LLP, Companies etc.)
- Business Turnover (Sales or Gross Receipts)
- Profit of the business (Gross Profit, Profit after Tax)
- Cash Flow of the business
- Nature of the business
Based on business profit and cash flow generation, different banks decide different eligibility of the loan amount they can lend to businesses. Banks need to ensure that the company can repay the EMI of the loan with the help of earnings that a business makes.
Documents Required to Get Loans for Businesses in Chennai
- ID Proof such as PAN card
- Address Proof such as a Voter ID Card, Ration Card, Passport or Driving License
- Latest audited Balance Sheet
- Latest Audited Profit and Loss Statement
- Latest Audited Cash Flow Statement
- Latest Audited Statement of changes in Equity, along with Notes to Accounts
- Bank Statement for the last six months
- Board Minutes & Board resolution (In case of companies)
- Income Tax Return for the last two years
- Statement of computation of Income for the last two years
- Latest Income Tax Return for Co- Applicants for the last two years
- Ownership proof of Residence/ Office
- PAN Card
- Trade license
- Memorandum of Articles, Association of Articles, Sole Proprietorship Declaration, Certified copy of partnership Deed
The list is incomplete. Ultimately it depends on your Financial Profile, Risk Assessment of the Individual Banks, Loan Requirements and Terms and Conditions prescribed by the Bank.
How to Apply for a Business Loan?
Let us know look at the way to apply for a business loan. A few steps need to be followed.
1. Learn About Different Types of Loans and Their Application Mediums.
There are various types of loans, such as working capital loans, MSME loans, etc. The nature of the loans varies according to the business and banking regulations. So first, decide which kind of loan you want to avail yourself of for which sector of your business. This is a significant and crucial first step.
2. Start Preparing All the Essential Documents.
A financial institution’s primary job is to lend secured and unsecured loans to its borrowers. Now they do not know if that borrower can be trustworthy or not. What if he defaults on a loan and the bank’s name gets involved in a scam? That will be a substantial financial loss for the bank itself. Hence, to secure themselves from all kinds of peril, documentation is a huge thing for a bank, and it has increased even more after the infamous scams that have taken place over some years. Above listed are several KYC documents a customer needs to keep handy before asking for a business loan.
3. Always Use a Business Loan Calculator.
Another easy way of getting approval is to fill out the exact amount of loan one can afford to borrow. Several lenders today host online EMI Calculators free of charge, and you can use one to understand and estimate the EMI amount you need to repay.
4. Practice Caution for Certain Factors Like Your Cibil Score, Business Plan Etc.
Your CIBIL Score, business plan, and type of loan can help you get the loan early. So make them better.
5. Consult with the lenders for a speedy disbursal of the loan.
You can consult with the lending institutions if there is an online method of payment or approval process if there is a paperless system available. Do your market research before approval. Keep your financials updated and ready.
Banks That Provide Business Loans in Tamil Nadu
Various banks issue loans for businesses in Chennai. They are:
- HDFC Bank
- ING Vysya Bank
- ICICI Bank
- Standard Chartered Bank
- Fullerton India
- Manappuram Finance Limited
Tamil Nadu Government Loan Schemes for Small Businesses
The Tamil Nadu Government has introduced various schemes for small business houses over the previous years.
1. Tamil Nadu Industrial Investment Corporation Scheme Limited- (TIIC)
2. Unemployed Youth Employment Generation Program- (UYEGP)
3. Micro Small & Medium Enterprises, Tamil Nadu- (MSME, Tamil Nadu)
4. New Entrepreneur Cum Enterprise Development Schemes- (NEEDS)
5. Tamil Nadu Adi Dravidar Housing Development Corporation Schemes implemented for Scheduled Caste- (TADHCO)
6. Department of Backward Classes and Most Backward Classes and Minorities Welfare- (TABCEDCO)
7. Tamil Nadu Industrial Cooperative Bank Schemes- (TAICO)
Financial institutions provide several types of business loans to other business establishments so they can continue expanding. The advantage of those loans is that as they grow more adaptable, a wider part of the population can apply for loans. It will be accessible to more than just large corporations or medium-sized organisations. Even owners of small businesses can carry on with their everyday operations without stressing over their working capital and cash flow. Many businesses have seasonal business cycles, and they need on funding to grow and establish their operations without facing financial hardship.
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